Received: 26 March 2020 Revised: 10 November 2020 Accepted: 30 November 2020

DOI: 10.1002/csr.2100

RESEARCH ARTICLE

Difference in stakeholder engagement approach of small &

medium enterprises and large companies and its performance
implications

Kamalesh Kumar1 | Rishtee Batra2 | Giacomo Boesso3

1
College of Business, University of Michigan-
Dearborn, Dearborn, Michigan
2
Villanova School of Business, Villanova
University, Villanova, Pennsylvania
3
Department of Economics and Management,
University of Padova, Padova, Italy
Correspondence
Giacomo Boesso, Department of Economics
and Management, University of Padova,
Padova, Italy.
Email: giacomo.boesso@unipd.it
Abstract
Using the explicit and implicit Corporate Social Responsibility (CSR) framework, this
study investigates how small and medium enterprises (SMEs) and large companies
differ in their approach to CSR and what association these differing approaches to
CSR have with a company's financial and social performances. We develop and vali-
date a stakeholder engagement approach (SEA) scale and then present the results of
data collected from 211 SMEs and 179 large companies. The results indicate that
while large companies rely more on explicitly articulated and formally enacted
approaches to CSR, SMEs integrate social responsibility into their company activities
in informal and implicit ways. The results also show that the explicit approach has a
positive association with financial performance measures, while the implicit approach
has a positive association with social performance. The findings of this study provide
a more nuanced and theoretically grounded understanding of differences in the CSR
practices of SMEs and large companies.

KEYWORDS

CSR and SMEs, CSR-SMEs versus large companies, stakeholder engagement activities,
stakeholder engagement and SMEs, stakeholder engagement initiatives, stakeholder
management

1 | I N T RO DU CT I O N SMEs do in fact engage in socially responsible activities but that the

With the growing awareness of CSR among stakeholders of all types
(community members, customers, employees, etc.), companies of all
sizes face increasing pressure to focus on CSR activities in a way that
enhances their growth and competitive advantage. Comparative
research on CSR practices and policies has identified remarkable dif-
ferences between small and medium enterprises (SMEs) and large
companies (Moneva-Abadía, Gallardo-Vázquez, & Sánchez-
Hernández, 2019). The findings of this research has led some
researchers to conclude that SMEs lag behind in the development and
adoption of CSR practices and programs (Baumann-Pauly, Wickert,
Spence, & Scherer, 2013) and are not able to benefit from their
engagement in CSR to the same extent as their larger counterparts
(Nejati, Quazi, Amra, & Ahmad, 2017). However, others argue that
evaluation of CSR activities among SMEs might be better explored
using alternative frameworks (Cantele & Zardini, 2020; Morsing &
Perrini, 2009). It has also been suggested that in assessing the rela-
tionship between CSR and company performance among SMEs, one
needs to assess the contribution of CSR to company performance in
terms of non-financial rather than exclusively using financial perfor-
mance measures. Such non-financial measures of performance include
increased social capital, which is generally associated with the intangi-
ble assets of reputation, trust, legitimacy, and consensus
(Spence, 2007), or enhancement of socioemotional wealth, which
encapsulates the desire to perpetuate organizational values, conserve
social capital and fulfil organizational obligations towards stakeholder
groups (Gómez-Mejía, Haynes, Núñez-Nickel, Jacobson, & Moyano-
Fuentes, 2007).

992 © 2020 ERP Environment and John Wiley & Sons Ltd. wileyonlinelibrary.com/journal/csr Corp Soc Responsib Environ Manag. 2021;28:992–1001.
KUMAR ET AL.
2 | P U R P O S E OF TH I S ST U D Y
The purpose of the present study is to investigate how the approach
to CSR differs among SMEs and large companies and how these dif-
ferences relate to the CSR-company performance relationship, both in
terms of financial and non-financial performance measures. More spe-
cifically, this study seeks to address the following research questions:
Is there a difference between the CSR approaches of SMEs and large
companies? If so, what is the nature of these differences? And, to
what extent do these differences in CSR relate to a company's finan-
cial and non-financial performance?
We draw upon Matten and Moon's (2008, 2020) framework of
explicit and implicit CSR to investigate how SMEs differ from large
companies in their approach to CSR. As the name suggests, an explicit
approach to CSR involves overtly articulating company-specific CSR
policies and programs of social interest as well as the company's
attachment to various stakeholder groups. In contrast, an implicit
approach to CSR is rooted in the notion that companies are but one
of many bodies that exist within a set of wider formal and informal
institutions that serve the interests and concerns of society at large.
We first develop and validate a stakeholder engagement approach
(SEA) scale that is used to assess the explicit versus implicit
approaches that companies may adopt in CSR. We then analyze data
and present the results of surveys utilizing this SEA scale, collected
from 390 companies, including 211 SMEs and 179 large companies.
Finally, we examine the relationship between explicit versus implicit
CSR approaches and companies' financial and non-financial perfor-
mance and provide an interpretive discussion of our findings.
3 | S M E s A N D LA R G E C O M P A N I E S :
D I F F E R E N C E S I N T H E I R A P P R O A C H T O CS R
A N D A SSOC I A T I ON WI TH C OM P A N Y
PERFORMANCE
A review of the research on the business practices of SMEs reveals
that although socially responsible business practices have always been
and continue to be part of the day-to-day business activities of SMEs,
they are enacted in ways that are not explicitly and formally articu-
lated (Baumann-Pauly et al., 2013; Cantele & Zardini, 2020; Stoian &
Gilman, 2017). It has been noted that SMEs often engage in what has
been dubbed as “silent CSR” or “sunken CSR” and that they are often
“unknowingly socially responsible” (Jenkins, 2006; Perrini, Pogutz, &
Tencati, 2006). SMEs focus their attention on issues that are “closer
to home” such as engagement with the community and motivation of
employees. SMEs' CSR efforts are also linked their owners' or man-
agement's philanthropy as well as their efforts to participate in the
local community (Jenkins, 2006). Fuller and Tian (2006) found that the
manner in which business is conducted in SMEs is largely personal
and they argue that the embeddedness of the SME within its stake-
holder community plays a large part in shaping the nature of their
socially responsible behaviors. Similarly, in their study of Italian SMEs,
Russo and Tencati (2009) noted that SMEs maintain a high degree of
993
involvement with employees at different levels within the organiza-
tion. Such involvement translates to an advantage that allows SMEs
not only to create value for employees, but also for the environment
and local communities in which they do business.
Past research indicates that while SMEs may be already managing
a large number of social, economic, and environmental impact issues,
they do not necessarily approach these tasks in the same way as large
companies (Cantele & Zardini, 2020; Wu, 2017). In general, SMEs are
characterized by less formal structures, looser control systems, less
documentation and fewer explicit procedures (Baumann-Pauly
et al., 2013; Castka, Balzarova, Bamber, & Sharp, 2004). They also do
not have specialized staff nor do they have the time to produce spe-
cial reports. In comparing the CSR approach of SMEs and large com-
panies, Russo and Tencati (2009) noted that while SMEs did not
formalize CSR practices or integrate these practices into strategic pro-
cesses, they showed an unwavering commitment to CSR in principle
as well as in practice. This commitment to CSR was often anchored in
the context of virtuous and principled business practices to which
SME managers adhered (Prieto-Sandoval, Jaca, Santos, Baumgartner, &
Ormazabal, 2019).
While, for SMEs, CSR is implied in the wider community responsi-
bility and customary societal expectations, the CSR practices of large
companies are embedded in a system that afford opportunities and
incentivizes them to take explicit responsibility. Examples of explicit
CSR can be found in the voluntary initiatives of numerous large com-
panies, which combine social and business value to address issues
perceived as being part of the corporate social responsibility and are
largely at the corporate discretion of individual companies. In addition,
these companies engage with stakeholder groups in a more formal
way and enact social policies and programs based on the perceived
expectations of different stakeholder group (Cassely, Revelli, Ben
Larbi, & Lacroux, 2020).
Thus, although CSR may be considered strategically significant by
both SMEs and large companies, the principles behind its adoption,
the manner in which it is articulated and the policies and practices
that are pursued are embedded in the business and institutional con-
texts of these companies. As a result, one would expect differences
between SMEs and large companies in terms of their underlying con-
ception of CSR, the CSR issues to which they attend as well as the
modes by which CSR is addressed. Therefore, we hypothesize the
following:
H1a. Large companies will use explicit CSR more frequently than
implicit CSR.
H1b. SMEs will use implicit CSR more frequently than explicit CSR.
3.1 | CSR approach and company performance
Studies that have examined the association between CSR and perfor-
mance among large companies have found that CSR initiatives have a
greater impact on company's financial performance if the company
994
approaches CSR in a strategic way rather than approaching it based
on a generic rationale (Michelon, Boesso, & Kumar, 2013). With
respect to the relationship between CSR activities of SMEs and com-
pany performance, recent research shows that the CSR efforts of
SMEs largely involve informal management approaches, lack sophisti-
cated processes and are systematically disadvantaged in light of the
increasingly complex reporting expectations of stakeholders
(Cantele & Zardini, 2020; Wu, 2017). These weaknesses put SMEs at
a disadvantage in their ability to shape stakeholder relationships and
to benefit from the value created for different stakeholders
(Santos, 2011; Stoian & Gilman, 2017). Given these findings, one is
inclined to believe that socially responsible behavior may not contrib-
ute to the financial performance of SMEs the in the same way that it
does to large companies. Therefore, we hypothesis that:
H2a. An explicit approach to CSR will have a stronger association with
financial performance than an implicit approach to CSR.
However, since implicit CSR initiatives are based on societal
expectations, community norms and customary obligations, it appears
reasonable to think that such efforts would generate some form of
socioemotional wealth because of the manner in which they are
embedded in relationships with various stakeholders. As Gómez-Mejía
et al. (2007) describe, such socioemotional wealth1 includes non-
financial outcomes that encapsulate a greater desire to perpetuate
organizational values, conserve social capital and fulfil organizational
obligations rather than focusing strictly on competence-based out-
comes. Although previous researchers have described such initiatives
enacted by SMEs as “sunken CSR” (Perrini et al., 2006), we argue that
such implicit CSR initiatives are not really “sunken”. Rather, such ini-
tiatives will help generate social capital (Spence, 2007) in the form of
trust and legitimacy. These, in turn, will lead to higher stakeholder sat-
isfaction, which would be associated with enhanced social perfor-
mance. It is, therefore hypothesized:
H2b. An implicit approach to CSR will have stronger association with
social performance than an explicit approach to CSR.
4 | S A M P L E A N D D A T A CO L L E C T I O N
The sample for the present study consisted of 390 companies—211
SMEs and 179 large MNC. The data for this study comes from a larger
database that was collected by authors to examine CSR and stake-
holder management practices. The data was collected over a period of
2 years, roughly in the same time period from 113 companies from
the US, 115 from Italy and 162 from Japan. Although we used the
database for research on other aspects of CSR, the data related to the
Stakeholder Management Approach that is used in this study has not
been previously used.
The data were collected in the United States and Italy using anon-
ymous questionnaire (in English) that was administered while the
managers attended management seminars. In Japan, the data was
KUMAR ET AL.
collected via a mailed questionnaire that was translated into Japanese
by a native Japanese co-author. The translation was double-checked
by two additional Japanese natives, one a professor of accounting and
the other an associate at the Osaka Research Center for Industry and
Economy. Both of the individuals conducting the language translation
check were proficient in English and due to the nature of their jobs,
had a good understanding of CSR. Once translated, the questionnaires
were delivered to Japanese companies that were randomly selected
from the Establishment Frame Database.
Companies included in the sample represented seven different
industries including industrial, pharmaceuticals, fashion, financial ser-
vices, food, energy and other services. 47% of the managers included
in the sample worked in manufacturing organizations, 28% in service
organizations and the rest in other mixed activity organizations. 64%
of the managers had 10 years or more of work experience. As such,
the respondents in our sample held positions that allowed them to
have an understanding about the CSR and stakeholder management
practices of their organizations.
5 | M EA S U R E M E NT
5.1 | Operationalization and Measurement of SEA
Our literature search revealed no established scale for measuring SEA.
A review of the extant literature (Aguinis & Glavas, 2012; Ben-Amar &
Chelli, 2018; Taras, Steel, & Kirkman, 2011) showed that the vast
majority of the CSR studies (e.g., Cassely et al., 2020; Choi &
Wang, 2009; Coombs & Gilley, 2005; Hillman & Keim, 2001; Kumar,
Boesso, & Michelon, 2016; Sannino, Lucchese, Zampone, &
Lombardi, 2020) have relied on databases such as the Kinder,
Lydenberg, Domini (KLD), the Fortune Index or other databases, all of
which evaluate companies in terms of their engagement in and their
ability to meet the demands of various stakeholder groups. Other stud-
ies (e.g., Lee, Ha-Brookshire, & Chow, 2018; Russo & Tencati, 2009;
Stocker, de Arruda, de Mascena, & Boaventura, 2020) simply asked the
respondents whether or not (or to what extent) they engaged in a list
of socially responsible behaviors related to various stakeholder groups.
While using proxy measures from publicly available databases
(such as corporate social disclosures and reports) to assess CSR activi-
ties offers the advantage of objectivity, it does not provide much
insight into the actual approaches adopted by companies in the per-
formance of the CSR initiatives. Since the focus of the present study
is to understand differences in the approach to CSR (explicit
vs. implicit) rather than merely the presence or absence of stakeholder
engagement activities, we chose to develop a multi-item SEA scale. In
developing this new SEA scale, we took various precautions to per-
form validity and reliability tests to ensure the scale's psychometric
robustness. These measures are described in more detail in the sec-
tions that follow.
The SEA scale utilized Matten and Moon's (2008, 2020) explicit
vs implicit CSR framework to assess differences in the way managers
approached and responded to various CSR issues. Based on a detailed
KUMAR ET AL.
scholarly review of a myriad of CSR activities (Porter & Kramer, 2006)
implemented by organizations of all sizes (from small to large), an ini-
tial pool of 12 items with explicit/implicit approaches to stakeholder
engagement initiatives was generated. Out of this pool of items, eight
items with the highest item-total correlations were used. The other
four items, which had low/non-significant item-total correlations,
were dropped. Of the remaining eight items, four items reflected an
implicit approach, while the other four reflected an explicit approach
to managing CSR issues (see Table 2 for the item's list). These items
reflected a variety of CSR actions and initiatives utilized by organiza-
tions across industries.
5.2 | Validity and reliability of the SEA scale
The content validity of the items used in the SEA scale were assesses
using a panel of organizational behavior and strategy researchers. The
scale's predictive validity was tested by correlating an item (not
included in the SEA scale) that clearly related to “explicit CSR” (“My
company tries to deal effectively with negative impact of its activi-
ties”) with the eight items on the SEA scale. This item was both signif-
icantly and positively correlated with the items designed to measure
“explicit CSR,” while it had a non-significant or significant negative
correlations with items designed to measure “implicit CSR.” We
repeated this procedure for assessing the validity of the items
designed to measure “implicit CSR” and correlated another item (not
included in the SEA scale) that clearly related to “implicit CSR” (“My
company is aware of the social impacts of its activities”). We obtained
similar results in this analysis as well.
5.3 | Reliability check
Using a subsample of 42 participants from the original sample, we
conducted a test–retest procedure 2 months later, with the goal of
assessing the reliability of the multi-item scale used to measure
explicit and implicit CSR. The test–retest reliability coefficient for the
questions ranged from 0.67 to 0.88, with a mean reliability of 0.76,
which is greater than the generally accepted level of 0.70
(Nunnally, 1978).
5.4 | Measurement of organizational performance
A meta-analytic study by Orlitzky, Schmidt, and Rynes (2003) found
that while CSR is more highly correlated with accounting-based mea-
sures of company performance than it is with market-based indica-
tors, both contribute to company performance. For an accounting-
based measure, we utilized growth in revenue while for the market-
based measure, we used improvement in market share. In our study,
organizational performance was measured using a subjective rather
than an objective approach because many of the small organizations
in our sample either did not have reported performance information
995
or were reluctant to provide “hard” performance data. Previous stud-
ies that have used both subjective and objective measures of organi-
zational performance have found a strong correlation between the
two approaches (Venkatraman & Ramanujam, 1986). In addition, past
researchers have asserted that it is appropriate to use subjective mea-
sures where objective measures are inappropriate or unavailable
(Dess & Robinson, 1984).
Both financial and non-financial performance were measured
using a modified version of a scale developed by Gupta and
Govindarajan (1984). Respondents were first asked to indicate the
level of importance their organization attaches to the performance
criteria of growth in revenue, improvement in market share on a
5-point Likert scale (1 = of little importance and 5 = of extreme
importance). Next, they were asked to indicate the extent to which
their organization was satisfied with their performance along these
criteria using another 5-point Likert scale (1 = highly dissatisfied
and 5 = highly satisfied). We measured social performance in the
same manner, asking first about the importance of stakeholder
engagement initiatives and then asking respondents about their
satisfaction with the success of these stakeholder engagement ini-
tiatives. For each performance measure, a weighted average was
computed by multiplying the “satisfaction” score with the “impor-
tance” score.
6 | RE SU LT S
The data collected in this study allowed us to examine the approach
(explicit vs. implicit) that SMEs and large companies take to manage
CSR and how the difference in approach may be associated with a
company's financial and non-financial performance. First, we gener-
ated a correlation matrix to examine the mean and the standard devia-
tion associated with the various items and checked for
multicollinearity. As seen in Table 1, the means associated with vari-
ous SEA measures have a large spread (0.22–0.55), which highlights
the variation that exists in the stakeholder management practices of
the companies we sampled, while low correlations indicate that the
items used to measure both constructs were in fact distinct from each
other.
6.1 | Factor analysis
A factor analysis was conducted in order to identify differences in
companies' approaches to the 8-item SEA scale that was developed.
We opted to use the Direct Oblimin Method of oblique rotation since
there was a reason to believe that there might be a theoretical rela-
tionship between the underlying factors. The Kaiser-Meyer Olkin
(KMO) and Bartlett's Test measure of sampling adequacy was used to
examine the appropriateness of the factor analysis. The approximate
of Chi-square is 125.83 (p = .001) and the KMO statistic of 0.65 is also
large (greater than 0.50). Hence, the factor analysis was an appropri-
ate tool for further analysis.
 996

TABLE 1 Mean, standard deviations and correlation: all variables (n = 390)

Mean SD SE1 SE2 SE3 SE4 SE5 SE6 SE7 SE8 RG MS SP SZ IM EX

SE1 0.40 0.49 1 0.13* 0.03 0.22** 0.22** 0.30** 00.04 0.11 0.18** 0.20** −0.00 0.31** 0.16** 0.69**
** ** **
SE2 0.55 0.50 1 0.04 0.18 0.18 0.09 0.19 0.01 0.03 0.03 0.02 0.03 0.00 0.18**
SE3 0.45 0.50 10. 0.14** 0.11* 0.13** 0.18** 0.23** −0.02 −0.08 −0.08 0.09 0.67** 0.12*
** ** ** ** ** ** **
SE4 0.25 0.43 1 0.31 0.30 0.23 0.12 0.19 0.16 0.04 0.19 0.21 0.69**
SE5 0.41 0.49 1 0.32** 0.04 0.13 0.21** 0.29** 0.05 0.23** 0.18** 0.73**
** ** ** **
SE6 0.22 0.41 1 0.13 0.05 0.15 0.15 0.10* 0.31 0.26 0.43**
SE7 0.30 0.46 1 0.21** 0.06 0.04 0.10* −0.07 0.25** 0.09
**
SE8 0.44 0.50 1 0.00 0.02 −0.03 −0.06 0.70 0.07
RG 11.79 6.81 1 0.69** 0.10* 0.29** 0.07 0.27**
MS 11.06 6.56 1 0.14** 0.31** 0.03 0.31**
SP 11.99 2.31 1 −0.02 −0.07 0.04
SZ 0.54 0.50 1 −0.07 0.35**
IM 1.15 0.94 1 0.06
EX 1.05 1.00 1

Abbreviations: EX, explicit stakeholder engagement approach; IM, implicit stakeholder engagement approach; MS, increase in market share; RG, growth in revenue; SP, social performance; SZ, size; SE1..
SE8, stakeholder engagement approach.
**p < .01; *p < .05.
KUMAR ET AL.
KUMAR ET AL.
TABLE 2 Factor analysis: Stakeholder engagement approach
Scale item
1: My company is actively involved in constructive dialogue with
stakeholders (local government, regulators, local community/
organizations) to identify issues that matter to them
2: The stakeholder management efforts of my companies are generally
aimed at managing good citizenship image of the company
3: My company tries to find ways to reinforce company's business by
advancing social conditions
4: Corporate philanthropy in my company has clear measurable goals
and results are tracked over time
5: My company takes pride in its positive involvement in the
community
6: My company has invested in social aspects in ways that improves its
competitiveness
7: My company attempts to incorporate social dimensions that will
create social impact to its business decision
8: My company's business activities are aimed at integrating business
with social needs
Cumulative variance
Bold values indicate significant higher score.
We extracted two factors (each with Eigenvalues above the rule
of thumb of 1), accounting for 42% of the variance in the research
model. The results revealed factor loadings such that three items
loaded on the first factor while four items loaded on the second fac-
tor. Each of these items loaded 0.5 or higher on one factor and .23 or
lower on the other. Only one item (“The stakeholder management
efforts of my company are aimed at managing good citizenship image
of the company”) loaded weakly on “implicit CSR.” The cross-loading
item was removed from the SEA scale, as it did not distinctly load on
one or the other construct. A closer examination of the seven items
revealed that the scale items in factor one were all related to “implicit
CSR,” while the scale items in factor two were all related to “explicit
CSR.” The results of the factor analysis are reported in Table 2.
6.2 | Prevalent approaches to CSR in SMEs and
large companies
Having validated the SEA scale, we conducted t-tests to examine the
differences between SMEs and large companies in their approach to
CSR. As shown in Table 3, in support of H1a, the results of our first
t test reveal that large companies use an explicit approach to CSR
more often than the implicit approach (Mexplicit = 1.43 vs.
Mimplicit = 1.22, t = 17.01, p < .01). As shown in Table 4, in support of
H1b, the results of a second t test reveal that small companies use an
implicit approach to CSR more often than explicit approach
(Mimplicit = 1.09 vs. Mexplicit = 0.72, t = 17.23, p < .001).
Next, to understand the nuanced differences in the SEAs of SMEs
and large companies, we conducted a Multivariate Analysis of Vari-
ance (MANOVA) looking at each of the eight individual items included
in the explicit vs. implicit CSR scale. The results of this analysis
997
Factor 1 “Implicit CSR” Factor 2 “Explicit CSR”
−0.15 0.66
0.32 0.13
0.71 0.01
0.21 0.63
0.10 0.67
0.17 0.67
0.62 0.23
0.65 0.09
42.30%
(presented in Table 5) show significant differences in terms of four of
the eight items. A closer look at these item shows that large compa-
nies view stakeholder engagement initiatives as a way of enhancing
reputation and improving competitiveness. They also appear to take a
strategic approach to CSR. SMEs, on the other hand, approach CSR
initiatives as a way of integrating social needs and community expec-
tations with their business activities.
6.3 | Approach to CSR and company performance
Having established that there were in fact differences in the CSR
approach (implicit vs. explicit) between large companies and SMEs, we
then sought to test the association between approaches to CSR and
company performance, both in terms of financial and social perfor-
mance. We tested the relationship between CSR and company perfor-
mance using OLS regression analyses, with explicit and implicit CSR as
independent variables and growth in revenue and improvement in
market share as dependent variables to measure company's financial
performance and social performance to measure company's non-
financial performance.
We included size of the company and competitive position as
control variables, based on the recommendations of previous
researchers (Brammer, Brooks, & Pavelin, 2006; Cassely et al., 2020;
Coombs & Gilley, 2005). As companies grow in size, they are more
likely to face stakeholder pressure and thus more likely to engage in
CSR initiatives (Burke, Logsdon, Mitchell, Reiner, & Vogel, 1986). We
also controlled for competitive position of the company because com-
panies with stronger competitive positions are more likely to adopt
CSR initiatives to positively influence their stakeholders (Stoian &
Gilman, 2017). In addition, since the data was collected from
998 KUMAR ET AL.

T A B L E 3 T Test: implicit and explicit

Company type Approach to CSR N Mean Delta T Sig.
CSR in large companies
Large companies Implicit 179 1.22 .21 17.05 ***
Explicit 179 1.43

Bold values indicate significant higher score.

T A B L E 4 T Test: Implicit and explicit

Company type Approach to CSR N Mean Delta T Sig.
CSR in SMEs
SMEs Implicit 211 1.09 .37 17.23 ***
Explicit 211 .72

Abbreviation: SME, small and medium enterprises.

Bold values indicate significant higher score.

T A B L E 5 MANOVA: Stakeholder
Stakeholder engagement initiatives Size N Mean SD F Sig.
engagement approach-SMEs and large
SEA 1 Large 179 0.56 0.49 42.42 *** companies
SME 211 0.26 0.43
SEA 2 Large 0.54 0.50 0.40 NS
SME 0.57 0.51
SEA 3 Large 0.40 0.49 3.29 NS
SME 0.49 0.50
SEA 4 Large 0.34 0.47 15.52 **
SME 0.17 0.37
SEA 5 Large 0.53 0.50 22.81 ***
SME 0.30 0.45
SEA 6 Large 0.36 0.48 41.67 ***
SME 0.10 0.30
SEA 7 Large 0.34 0.47 1.95 NS
SME 0.27 0.44
SEA 8 Large 0.47 0.50 1.49 NS
SME 0.41 0.49

Abbreviation: SME, small and medium enterprises.

Bold values indicate significant higher score.
***p < .00; **p < .01; *p < .05.

companies that belonged to different countries, we also controlled for
the country of origin (Ben-Amar & Chelli, 2018). The results of the
regression analyses (presented in Table 6) show that while explicit
CSR has a positive and significant association with both measures of
financial performance, implicit CSR has no significant association with
either of them. On the contrary, the results show that social perfor-
mance has a positive significant association with implicit CSR and no
significant association with explicit CSR.
6.4 | Predictive validity of the Study's framework
correctly predicting the category of outcome for individual cases using
the most parsimonious model. Based on the rationale provided above,
we once again included size of the company, competitive position and
country of origin as control variables (Ben-Amar & Chelli, 2018).
As shown in Table 7, we found that when we “fit” the regression
model to the data, the Logit model has a good fit (using chi-square as
the measure of fit) for SMEs and large companies (78%). These results
provide further evidence that in fact, SMEs and large companies do
indeed approach the stakeholder engagement initiatives associated
with CSR differently.

Since the goal of the present study was to examine differences in the
CSR approaches ofbSMEs and large companies, we tested the predic-
tive probability of the differences found in the results using a logistic
regression analysis, which estimates the probability of a binary
response based on one or more predictor variable with a goal of
7 | DI SCU SSION
The present study drew upon the explicit and implicit CSR framework
to investigate how SMEs and large companies differ in their approach
to CSR and to determine if the difference in their approach to CSR is
KUMAR ET AL. 999

T A B L E 6 OLS regression: Approach

Dependent variable
to CSR and company performance
Independent variables Market share Growth in revenue Social performance
Implicit −0.16 0.14 0.25 *
(0.32) (0.34) (0.13)
Explicit 1.17 *** 1.00 *** 0.13
(0.32) (0.34) (0.13)
Size −1.09 −1.34 0.03
(0.70) (0.75) (0.28)
Comp. Advg 2.48 *** 2.24 *** 0.42 ***
(0.38) (0.41) (0.15)
Country −1.57 *** −1.29 *** 0.05
(0.41) (0.44) (0.16)
Constant 7.41 *** 8.12 *** 0.94
(1.39) (1.49) (0.56)
R2 0.26 0.20 0.17
F 26.24 *** 19.13 *** 2.28 *
N 387 387 387

Note: ***p < .00, *p < .01. Std. Err. in parenthèses.

TABLE 7 Logistic regression efforts towards stakeholder engagement, enact more frequently poli-
cies and programs that combine both social and business value propo-
Companies (small 1, large 0)
sitions, and more explicitly communicate claims regarding their
B Wald Sig. socially responsible behaviors. For SMEs, CSR is often implied in the
Implicit −0.12 0.78 NS wider community responsibility and customary societal expectations.
Explicit −0.52 15.35 *** Not only is what constitutes CSR different for SMEs and large compa-
Comp. Advg. −0.53 10.01 *** nies, but the manner in which CSR initiatives are implemented in
Country 1.29 64.58 *** SMEs is also different from large companies. SMEs act in a socially

Costant −0.41 0.55 NS
% correctly classified 78%
Chi-square 140.44 0.00
Nagelkerke R2 0.41
***p < .001; **p < .01; *p < .05.
associated with differences in their financial and non-financial perfor-
mance. The results of our study showed that while large companies
rely more on an explicitly articulated and formally enacted approach
to CSR, SMEs appear to develop their own informal and implicit ways
of integrating social responsibility into their company activities. These
findings confirm the observations made by previous researchers who
have noted that implementing CSR in SMEs is not necessarily the
same as in large companies (Tilley, 2000). Thus, even though CSR
appears to be considered significant by both SMEs and large compa-
nies, the principles behind its adoption appear to be embedded in the
business and institutional contexts that are specific to SMEs and large
companies.
The fact that large companies were making more frequent use of
the explicit approach to CSR than SMEs is not entirely surprising since
it is commonly acknowledged that large companies generally explicitly
articulate their CSR. Large companies also appear to make more active
responsible manner more frequently than large companies by comply-
ing with customary societal expectations, and accounting for the
interests and concerns of the community in which they operate. They
also make less frequent company-specific claims of socially responsi-
ble behaviors, since the view socially responsible business practices as
part of their day to day business activities and not an additionally
mandated responsibility to be reported.
With respect to the relationship between a company's CSR
approach and its financial performance, it appears that the implicit and
informal approach to CSR adopted by SMEs puts them in a position of
disadvantage compared to large companies. In terms of both measures
of financial performance (growth in revenue and growth in market share),
the explicit approach adopted by large companies has a much stronger
and significant association with the two performance measures. One can
also infer from these results that SMEs' plan and implement social
engagements in a less strategic way, and that their social engagement
initiatives generate less financially viable business value propositions.
However, when performance is measures in non-financial terms,
the results are somewhat of a contrast. The implicit approach to CSR,
adopted more frequently by the SMEs, has a much stronger and sig-
nificant association with social performance. It appears that the CSR
efforts of SMEs, which result from collective and normative delibera-
tions of players involved in their institutional context, helps them fulfil
1000
the concerns and interests of their stakeholders more effectively. In
effect, it helps them generate what has been called as “social capital”:
(Spence, 2007), which manifests in the gains of intangible assets, such
as reputation, trust and legitimacy.
8 | CONCLUSIONS AND LIMITATIONS
It has been observed that SMEs should not be thought of as merely
being miniature clones of large companies (Tilley, 2000). The nature
of the practices and approaches to CSR activities in SMEs are intrinsi-
cally different than that of their larger counterparts (Spence, 2007), as
are a multitude of other factors, including the amount of resources
available to them, the type of managerial values that prevail as well as
the level of engagement with stakeholders (Cantele & Zardini, 2020;
Coppa & Sriramesh, 2013). The results of the present study corrobo-
rate this and further show that the best approach to understanding
the CSR-company performance relationship in SMEs might not be the
same as the lens used to understand the approach to CSR undertaken
by large companies.
Based on the findings of our study, one can say that although
SMEs may have some policies and programs that are similar to that of
large companies but that these policies and programs emanate from
societal norms associated with expectations of different stakeholder
groups and are embedded in customary relationships. From the CSR-
company performance point of view, the approach adopted by SMEs
does not appear to contribute to their growth or competitive advan-
tage. However, when performance is measured in non-financial terms,
the results are in contrast. The implicit approach adopted more fre-
quently by the SMEs helps them better fulfil the concerns, interests
and expectations of their stakeholders. In effect, it helps them gener-
ate and accrue what has been described as “social capital”
(Spence, 2007) or socio-emotional wealth, which is manifest in intan-
gible assets, such as reputation, trust and legitimacy (Gómez-Mejía
et al., 2007).
The present study makes contributions to both theory and prac-
tice. First, we contribute to the debate on CSR adoption by SMEs by
using a well-established theoretical framework (explicit versus
implicit CSR) to examine differences in the CSR approaches of SMEs
and large companies. We believe that such an investigation resulted
in a more nuanced and theoretically grounded understanding of the
differences in the CSR practices of SMEs and large companies. Sec-
ond, we contribute to the ongoing debate regarding CSR and com-
pany performance, as it relates to SMEs and provide additional
insights into the likely contribution of CSR to the non-financial per-
formance of SMEs.
From the practitioner perspective given the increasingly impor-
tant role that CSR appears to be playing in the competitive success of
companies, both large and small, one should not discount these find-
ings. Although one does not expect SMEs to replicate what large com-
panies are doing by way of CSR, knowing which CSR activities
contribute to company growth is crucial to the success of CSR among
SMEs. Given the higher constraints that SMEs face on their resources,
KUMAR ET AL.
they need to focus on those CSR activities that are more likely to con-
tribute to their competitive advantage and enhanced growth. In this
regard, the first challenge for social policy makers rests in creating an
increased awareness among SMEs about adopting CSR measures in a
more effective manner. Next, they need to formulate policies and
plans that would facilitate increased systematic adoption of CSR
by SMEs.
Finally, we would like to acknowledge the limitations associated
with the findings of our study. This study is based on survey data, which
by its very nature is a perceptual measure. The data were collected
from three different countries. Although this enhances the generaliz-
ability of the findings, it also creates opportunities for confounding
effects. Similarly, even though the reliability and validity of the scale
constructed to measure SEA was established, it needs to be revalidated
by other researchers, using other methodologies. Despite these limita-
tions, this study does create potential for future research. The finding
that the approach to CSR adopted by SMEs puts them at a competitive
disadvantage, can be examined on longitudinal bases. On the other
hand, the finding that the implicit approach adopted by the SMEs is
more strongly associated with social performance, opens up an entirely
new avenue for future research. Future researchers could develop more
robust and multi-dimensional measures of social performance to
develop a better understanding of CSR and its outcomes among SMEs
vis-à-vis large companies.
OR CID
Giacomo Boesso https://orcid.org/0000-0002-7200-7696
ENDNOTE
1
The authors would like to thank the anonymous reviewer for suggesting
this line of thinking. We also gratefully acknowledge the use of the
expression as suggested in the review.
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How to cite this article: Kumar K, Batra R, Boesso G.
Difference in stakeholder engagement approach of small &
medium enterprises and large companies and its performance
implications. Corp Soc Responsib Environ Manag. 2021;28:
992–1001. https://doi.org/10.1002/csr.2100
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